Why does the federal reserve alter monetary policy?

1. to provide services to member banks

2. to lessen the effect of natural business cycles

3. to regulate the banking industry

4. to enable banks to clear checks

Your answer would be 2, to lessen the effect of natural business cycles.

The monetary policy is how the monetary authority controls the money. Business cycles are basically how the GDP changes over time. The monetary policy would therefore be modified based on what stage the business cycle is on, in order to make it so the country doesn't lose all their money.